Deutsche Bank downgraded Keller Group PLC to Hold from Buy on Thursday, raising its price target to 2200 pence from 1660 pence. The move comes after the geotechnical engineering firm announced a 42% dividend increase and a new £100 million share buyback program, representing a 10% total return yield. The company's group EBIT margin doubled from FY22 to FY24, reaching above 7%, a level not seen since before the global financial crisis.

The margin improvement signals confidence in sustained profitability, with the company reducing dividend cover to 3x. Shares rose following the announcement and now trade at 10 times Deutsche Bank's upgraded FY27 earnings per share forecasts, which increased 10% and assume the buyback at 220 pence. The margin has historically been cyclical, and the results sustained the elevated level for another year.

Deutsche Bank's downgrade reflects concerns about valuation rather than fundamentals. The shares have already priced in much of the positive news, including the buyback and dividend increase. The bank plans to move to a Hold rating ahead of the company's capital markets day in the second half of the year, which is expected to provide more detail on medium-term opportunities.